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Friday Financial Five – August 3rd, 2012

Friday, August 03, 2012


The ’92 Dream Team would be nine point favorites against this year’s squad . . .

RI sees 2nd quarter housing uptick

There was encouraging news for the 2nd quarter as Rhode Island home sales were up almost 18% over the same time frame in 2011. Numerous areas, and not just traditional real estate strongholds, saw huge increases in terms of total sales while also seeing a precipitous drop in the number of days on the market. While sales volume was up, the median price dropped slightly due in large part to the continued increased in distressed property sales, which was up almost 15%.

Olympics and big business

In the shadows of an exciting Olympics have been daily rumblings related to back office business dealings. There has been Twitter mayhem, a Dr Dre ambush with his “Beats” headphones upsetting the games’ sponsor, Panasonic, and the rumor that NBC’s unpopular coverage might actually break even on its $1.2 billion investment. The Olympics, like U.S. college sports, is supposed to be a celebration of “amateur” competition. But while the participants are expected to perform simply for their love of the game (and some taxable awards if they medal), everyone else fights over the billions of dollars to be made off of their excellence.

When will “Operation Twist” end?

In their most recent monetary policy meeting, the Federal Reserve once again committed to extending Operation Twist through the end of the year. This is a strategy used to lower long term investment rates by buying bonds with longer maturity dates and selling shorter term bonds. People are calling for the Fed to do more, but really what else can they do? At some point, hopefully sooner rather than later, the economy will improve and we’ll have to be faced with a rising rate environment. Then maybe your savings account will start paying an actual rate of return.

Search for income

The struggle for income for investors and retirees will continue to push money into higher risk categories. There’s currently a negative rate of return on 10 year treasuries on an inflation adjusted basis. One avenue to consider is high-yield bonds, which behave more like equities than fixed income holdings, but make sure to review the credit rating on an individual holding or the holdings of a high-yield mutual fund. If the economy really takes a turn for the worse, you could be susceptible to default.

Still time to obtain a loan from RISLA

If you’re a Rhode Island resident or sending a student to a Rhode Island school, you may still have time to put a loan in place from the Rhode Island Student Loan Authority. If you have good credit, these loans have a relatively low fixed rate of interest, a 6 month grace period, and are considered a viable alternative to the Federal PLUS loan. Generally, the application process takes about 2 weeks, so head over to www.RISLA.com to see if this loan makes sense for you

Dan Forbes is a regular contributor on business financial issues. His office is in Providence, RI. He leads the firm Forbes Financial Planning and can be reached at dforbes@forbesplanning.com


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